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TCFD Statement / Continued
Recommendation
Commentary
Strategy Climate-related risks and opportunities identified over the short, medium and long-term
Many climate-related risks will materialise over the medium to long-term and the assets we acquire and hold will still be here far into the future. Therefore, without appropriate risk management, these risks could have severe financial and reputational implications as well as physical risks to those occupying them. We believe it is vitally important to consider climate risk from multiple angles and timeframes. Therefore, we conducted a rigorous climate risk assessment across the two climate scenarios RCP 4.5 and RCP 8.5 by the Intergovernmental Panel on Climate Change (IPCC) to identify the top climate-related risks and opportunities to our business in the short-term (2020–2029), medium (2030–2039) and long-term (>2040) as well as assess their implications and the necessary actions to manage them. Our in-depth understanding of our material climate risks has enabled informed decision making, allowing us to employ robust risk management processes to address our material climate risks. Scenario analysis The comprehensive climate risk assessment process covered all relevant climate-related risks, selected as appropriate to the geography of our assets and the asset types in scope, across the decades 2020–2029, 2030–2039 and 2040–2049 under scenarios RCP 4.5 and RCP 8.5. By conducting both qualitative and quantitative climate risk assessments at the business and portfolio level, respectively, we were able to identify the risk profiles of our assets and most at-risk assets, strengthening our ability to make sound strategic decisions on where to focus mitigation actions and harness opportunities. The portfolio modelling, in collaboration with a leading modelling provider, assessed our assets’ susceptibility to climate-related risks, including physical risks, for example flooding, heat stress and extreme weather events, and transition risks, such as market risks and technology, in quantitative terms, exposing the potential financial losses and savings associated. The business level assessment qualitatively determined the likelihood and impact of a range of physical and transition climate-related risks on a scale of one to five, with consideration of the portfolio modelling results, by rigorously analysing the most up-to-date, peer-reviewed scientific literature. The impact assessment factored in the level of disruption, financial impact and ease/cost of mitigation of the risk, ranging from minimal or no impact (1) to catastrophic impact that threatens the business’ future (5). Likelihood was based on the probability, frequency, duration of impact and speed at which the risks materialise, ranging from risks with a short duration that materialise gradually to risks that materialise rapidly and endure over a significant period. High impact opportunities were also identified in relation to our business strategy. Three assets have been acquired after the assessment exercise in 2021. As part of the acquisition due diligence process, climate risk assessments were completed for these assets. In doing so, we identified potential climate-related risks, which demonstrated that these assets risk profiles were consistent with the rest of our portfolio, meaning our top risks and opportunities remained the same. We identified our top risks, which are included in the table below. Time horizons We have selected time horizons aligning with climate policy and available data. We have assessed our time horizons and current business strategy against climate risks over the short, medium and long-term. Short-term 2020–2029 Medium-term 2030–2039 Long-term >2040 To mitigate the largest
We aim to achieve net zero carbon by 2040, ahead of the UK Government’s 2050 target. Aligning this time horizon to our decarbonisation target supports clear stakeholder communications and asset planning, as net zero carbon and climate resilience measures can be executed in parallel.
We recognise that long-term climate risks present near-term challenges, such as reputational damage or reduced asset values. Identifying these risks has guided our investment decision to embed climate resilience across our business and portfolio.
impacts in the current decade, plans and resilience measures must be implemented in the immediate term. We are investing in our resilience now and setting short-term targets.
Picton Property Income Limited / Annual Report 2024 48
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